ST. PAUL – Many Minnesotans who are preparing to file their income taxes likely will see their returns improve due to legislation the House passed Monday.
Last session, the Democrat-led legislature approved comprehensive taxes legislation that reduced standard income tax deductions, leading to tax increases for roughly 76 percent of Minnesotans.
Rep. Paul Anderson, R-Starbuck, voted Monday to support a House bill to clean up these errors and prevent many from paying higher tax bills.
“I am pleased we addressed this issue early in the session to provide clarity for people as we enter tax season,” Anderson said. “This will help tax filers avoid needless headaches and boost the bottom line for many.”
Specifically, the bill correctly inflates the statutory amounts for the standard deduction, additional standard deduction for seniors and blind taxpayers, and standard deduction amounts for dependents. Without this correction, the Department of Revenue (DOR) estimates that an additional $352 million in general fund tax revenue would be raised starting in tax year 2024.
Anderson said he was disappointed the bill did not include agreed-upon language that would provide a technical fix to the Net Operating Loss (NOL) provision. This provision reduced the NOL deduction from 80% to 70 percent of taxable income for corporations. The legislative intent was to make this provision effective for tax year 2024. However, the 2023 Tax Bill contained an effective date of tax year 2023.
“Both tax chairs, in a letter to state officials, said they would pursue legislation at the earliest possible opportunity to correct the effective date of the Net Operating Loss provision,” Anderson said. “It is unfortunate the bill the House passed, surprisingly, did not include that fix.”
If the NOL error is not fixed, tax year 2023 filers will be liable for additional tax revenue with a general fund revenue gain of an estimated $14.8 million.
The House passed the bill 128-2 and sent it to the Senate for action.
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